Monster Beverage Corp (MNST)

Conclusion

Monster Beverage develops, markets and distributes energy drinks and related beverages in the United States and internationally. At 45.64 USD on 2026-11-09, the shares carry a market capitalisation of 89.3 billion USD.

The verdict is overvalued. The price stands on a P/E of 41.1x against a ten-year median of 36.5x, and a P/FCF of 46.5x against a median of 38.6x. The discounted cash flow gives 25.77 USD per share. The fair value band runs from 26.55 to 39.83 USD with a midpoint of 33.19 USD, and the fair value from historical multiples is 40.61 USD. That gives a margin of safety of -27.3% at the midpoint. The reverse DCF implies growth of 17.5% a year, against five-year revenue growth of 12.5% and five-year growth in free cash flow per share of 10.5%.

Three numbers hold the case up: a current ratio of 3.8x, free cash flow conversion of 88.5% over the last twelve months, and a return on invested capital that the data give only in comparison with its cost. The weakest numbers are the P/FCF premium of 20.4% to its ten-year median, an operating margin of 28.5% against a median of 32.9%, and three downward estimate revisions for next year over the last 30 days. If growth slows toward the five-year rate, the price has little room to be justified.

Financial health

Financial strength is green, held up by a current ratio of 3.8x, a quick ratio of 3.2x and interest coverage of 1,291.6x. The Altman Z-score is 29.1, in the safe zone, although the Altman model was designed mainly for manufacturers. Insolvency risk is low, about 0.0% by the estimate of the Ohlson model over one to two years. Net debt to EBITDA and debt to equity are not available, because the data contain no debt figure for the company. The cost of debt used in the analysis is an assumption rather than a reported figure. The company's free cash flow and liquidity give little reason for concern about its ability to meet obligations.

Earnings quality

Earnings quality is green, supported by free cash flow conversion of 88.5% over the last twelve months and 90.5% over five years, and by an accrual ratio of -2.2%, which means cash earnings are slightly ahead of reported earnings. Stock-based compensation is 1.4% of revenue, and free cash flow after it is 1.79 billion USD. The share count has fallen at a compound rate of 1.7% over five years, which indicates net buybacks. The Piotroski score is 6 of 8 evaluable criteria passed. The Beneish M-score is not available. Over the last eight quarters the company beat expectations five times and missed twice, with an average surprise of 0.4%. Estimate revisions are negative, with three downgrades for next year over the last 30 days.

Profitability

Profitability is green, though the margins sit below their own history. The gross margin is 55.3% against a ten-year median of 57.7%, the operating margin 28.5% against 32.9%, and the net margin 22.7% against 23.9%. The operating margin has a stability measure of 12.6%. Return on invested capital has a five-year median of 30.5%, while its current value is not available in the data and the difference from the 8.9% weighted average cost of capital is therefore not given. Return on equity is 22.1%. The DuPont split shows a net margin of 23.0%, an asset turnover of 0.83 and an equity multiplier of 1.21, so the return comes mainly from margins and only slightly from leverage.

Growth

Growth is green. Revenue has compounded at 9.5% over three years, 12.5% over five years and 11.8% over ten years, and it has grown in all ten of the last ten years. Earnings per share compounded at 20.1% over three years, 8.0% over five years and 15.1% over ten years. Free cash flow per share compounded at 46.6% over three years, 10.5% over five years and 30.2% over ten years. The five-year figures are the more reliable guide, and they sit below the 17.5% growth the reverse DCF implies at the current price. Next year's expected earnings growth is 12.8%.

Valuation

Valuation is red: the verdict is overvalued, with a margin of safety of -27.3%. Today's P/E is 41.1x against a ten-year median of 36.5x, a premium of 12.8%. P/FCF of 46.5x is 20.4% above its median of 38.6x, price to sales of 9.3x is 8.8% above 8.6x, and price to book of 9.1x is 12.0% above 8.1x. The DCF gives 25.77 USD per share, using a discount rate of 8.9% and a terminal growth rate of 2.5%. The fair value from historical multiples is 40.61 USD. The fair value band of 26.55 to 39.83 USD is an order-of-magnitude estimate built on fixed assumptions, including a 5% equity risk premium and capped growth. It is not a price target. The company pays no dividend, and its free cash flow yield is 2.2%.

Risks

The main risk is that growth slows toward the five-year rates, since the price implies 17.5% a year. Lower margins would also hurt, because the operating margin of 28.5% is already below its median of 32.9%. Continued downgrades to estimates would weaken the earnings base behind the multiples. The debt figures for net debt to EBITDA and debt to equity are not available, and the Beneish M-score is not available. The return on invested capital figure is not available in the data, so the gap to the cost of capital cannot be shown. The analysis has no debt maturity schedule and no revenue breakdown by segment, so the risks from debt repayment and from individual product lines cannot be assessed.